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Governing Documents 101
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Minnesota Community Living July/August 2012

Governing Documents 101

By Nigel H. Mendez

Irecently gave a presentation, organized by the Community Association Volunteer Leadership Committee (CAVL), on documents and statutes that govern associations in Minnesota. You can view the full presentation, along with many others, by visiting the CAI-MN website (www.cai-mn.com), and selecting Video Library from the Events tab. This is a brief summary of the presentation.

Homeowner associations are governed by certain Minnesota statutes, that are are the same for all associations, as well as by governing documents that relate to a specific association. Together the statutes and governing documents detail how the property can be used (rental restrictions, pets, parking restrictions, etc.) as well how the association operates (i.e. number of board members, notice requirements for meetings, quorum requirements.)

The Statutes
The Minnesota Common Interest Ownership Act (MCIOA), Minn. Stat. Chapter 515B, governs all condominiums as well as all townhome associations that were created on or after June 1, 1994.1 Older townhomes (pre-June 1994) can opt in to MCIOA via an amendment to their declaration. MCIOA provides specific reserve requirements, audit requirements, stronger collection powers and well thought out and tested provisions.

Even if your association is not covered by MCIOA, it would be covered by the Minnesota Nonprofit Corporation Act, Minn. Stat. Chapter 317A. This statute governs all nonprofit corporations in the State. Homeowner associations are created as nonprofit corporations. The Nonprofit Corporation Act provides guidance on such things as meeting requirements, voting, proxies, etc. If there is a question about voting or running of a meeting, it is probably covered by this statute. Unlike MCIOA, the Nonprofit Corporation Act covers all homeowner associations regardless of age, and there is no need to "opt-in.”

The Governing Documents
Besides the statutes that provide general governance structure, each association is also subject to a set of governing documents. These documents (articles of incorporation, declaration of covenants, conditions and restrictions, bylaws and rules and regulations) are often collectively referred to as the governing documents.

The articles of incorporation create the nonprofit corporation with the State. They are filed with the Secretary of State and are rarely amended. The Declaration of Covenants, Conditions and Restrictions are sometimes referred to as covenants or CCRs, but most commonly, in Minnesota, are simply called the declaration. The declaration creates the Common Interest Community (CIC) and establishes restrictions on the use of the property. The declaration is filed with the county recorder. The declaration usually contains information such as whether rentals are allowed, pet restrictions, what maintenance is provided by Association and how common expenses are assessed.

The bylaws detail how the association conducts its corporate business. The bylaws contain information about the officer and director positions and powers, meeting requirements of the board and the association members, what notice is required to have a meeting, how many members must be present to obtain a quorum and how proxy votes can be used. The bylaws are not required to be recorded with the county, but sometimes are.

The fourth governing document is the rules and regulations. The rules are usually adopted by the board of directors to further clarify the restrictions or powers created in the other governing documents. Rules created by the board cannot be in conflict with the articles, declaration or the bylaws. The rules are easy to create and update and are not filed with the county or the Secretary of State.

Conflicts
Any conflicts among the four governing documents are resolved using this hierarchy: The highest document is the articles of incorporation, followed by the declaration, the bylaws and finally the rules and regulations. Any item contained in a "lower” document must not be in conflict with a "higher” document. If a conflict does exist, the higher document controls. It is proper to have items contained in a lower document that clarifies or adds to a higher document. For example, if the declaration states that pets are allowed, subject to the regulation of the board of directors, a rule could require the registration of any pets with the association.

Taken together, the governing documents and the relevant statutes provide the details on how your association should operate. While many governing documents are similar, it is important to review the ones that apply to your association to ensure that they are being complied with.

1. Some condominium associations are also governed by certain provisions of Minn. Stat. Chapter 515 and/or Minn. Stat. Chapter 515A.

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